SEC Outlines Reasons for Reluctance to List Cryptocurrency ETFs

Companies that wish to list exchange-traded fund (ETF) linked to cryptocurrencies may now find the approval process hindered by additional concerns from the U.S. Securities and Exchange Commission (SEC), according to a staff letter issued by the regulator.

Responding to two investment associations on Jan. 18, the public letter is written by Dalia Blass, director at SEC’s Division of Investment Management. While the division has seen growing interests from proponents of mutual funds and ETFs that hold value in cryptocurrencies, the letter states that there are “significant investor protection issues that need to be examined before sponsors begin offering these funds to retail investors.”

According to Blass, the agency’s concerns mainly focus on five areas: valuation, liquidity, custody, arbitrage and potential manipulation. As the letter pointed out, for example, the SEC needs to evaluate how a cryptocurrency-related ETF can be fairly priced given the volatility of cryptocurrency prices, and amid technological changes such as blockchain forks.

In addition, liquidity remains another top issue that needs to be examined, in particular, how such innovative products can be redeemed by retail investors on a daily basis.

The letter states:

“Until the questions identified above can be addressed satisfactorily, we do not believe that it is appropriate for fund sponsors to initiate registration of funds that intend to invest substantially in cryptocurrency and related products, and we have asked sponsors that have registration statements filed for such products to withdraw them.”

Blass’ comments come following several recent filings with the SEC from firms seeking to list cryptocurrency-related ETFs. As reported by CoinDesk this month, some of these filings had been subsequently withdrawn, with the companies involved citing the regulator’s concerns over valuation and liquidity.

Last year, the SEC also rejected a request for a bitcoin-tied product proposed by noted bitcoin investors Cameron and Tyler Winklevoss.

SEC image via CoinDesk archive

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

Comments

comments

Filed in: Bitcoin Buzz Tags: ,

You might like:

Bitfinex Took 630 Million Tether Out of Circulation After Drop Below $1 Bitfinex Took 630 Million Tether Out of Circulation After Drop Below $1
Bitcoin Futures Could Go Live on ICE's Crypto Trading Platform in December Bitcoin Futures Could Go Live on ICE's Crypto Trading Platform in December
ABN AMRO, Samsung SDS Partner for Blockchain Trade Pilot ABN AMRO, Samsung SDS Partner for Blockchain Trade Pilot
Crypto Payments Startup Uphold Launches Lending Products Crypto Payments Startup Uphold Launches Lending Products
Bitmain's Latest Bitcoin Miner Update Activates Controversial 'AsicBoost' Bitmain's Latest Bitcoin Miner Update Activates Controversial 'AsicBoost'
Accenture Tech Now Connects Corda, Fabric, DA and Quorum Blockchains Accenture Tech Now Connects Corda, Fabric, DA and Quorum Blockchains
Public Company's Crypto Claims Draw SEC Scrutiny, Trade Suspension Public Company's Crypto Claims Draw SEC Scrutiny, Trade Suspension
The Delicate Psychology of Stablecoins The Delicate Psychology of Stablecoins
© 2018 Virtual Mining Bitcoin News. All rights reserved. XHTML / CSS Valid.